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SECURITY AND EXCHANGE COMMISSION
WASHINGTON, DC.
FORM 10 - QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997 Commission File No: 0-2661
Harrell International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-194618
(State of jurisdiction) (I.R.S. Employer identification)
17218 Preston Road, Suite 3200, Dallas, TX 75252
(Address of Principal executive offices)
(972)250-6370
(Registrant's telephone no., including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes__X__ No _____
(2) Yes__X__ No _____
The number of shares outstanding of the registrant's Class A,
$.01 par value common stock as of December 31, 1996, was
976,580. The number of shares outstanding of the registrant's
$1.00 par value perferred stock as of December 31, 1996 was
243,331.
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HARRELL INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION> Page
<S> <C>
Part I Financial Information
Item 1 Financial Statements 3
Consolidated Balance Sheets
-- As of March 31, 1997, and September 30 1996
Consolidated Statements on Income 4
-- Three Months Ended March 31, 1997 and 1996
Consolidated Statements of Cash Flows 5
-- Three Months Ended March 31, 1997 and 1996
Notes to Consolidated Financial Statements 6
Item 2 Management's discussion and analysis of 7
Financial Condition and Results of Operation
Part II Other Information 8
Signature Page 9
</TABLE>
2
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Part I FINANCIAL INFORMATION
Item 1 Financial Statements
HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION> March 31, 1997 September 30, 1996
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 34152 $ 140286
Accounts Receivable 82693 54836
Other Current Assets 2979 2888
Total Current Assets $ 119825 $ 198012
Investment in Joint Ventures 101200 -10163
Furniture & Equipment (net) 3935 5132
Total Assets $ 224961 $ 192980
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable and Accrued Liabilities $ 29716 $ 65968
Amounts Payable to Related Parties 8000 8000
Accrued Salaries & Payroll Taxes 649 551
Total Current Liabilities $ 38366 $ 74519
Note Payable 0 0
Total Liabilities $ 38366 $ 74519
Stockholders' Deficit:
Preferred Stock $ 243331 $ 243331
Common Stock:
Class A $.01 par value, 9,000,000 shares authorized,
976580 issued and outstanding 9766 9766
Class B $.01 par value, 1,000,000 shares authorized,
No shares issued or outstanding 0 0
Additional Paid in Capital 2077287 2077287
Accumulated Deficit -2143788 -2211923
Total Stockholders' Deficit $ 186595 $ 118461
Total Liabilities & Stockho $ 224961 $ 192980
</TABLE>
3
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HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended March 31 Ended March 31
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Management Fees $ 104,023 $ 102,536 $ 191,184 $ 192,509
Accounting Fees 0 0 0 0
Consulting Fees 0 10,000 0 10,000
Equity in earnings (losses)
of Joint Ventures 0 2,570 0 4,619
Other Income 5,323 388 46,742 1,603
Total Revenues $ 109,346 $ 115,494 $ 237,926 $ 208,731
Expenses:
Employee Compensation &
Related 82,938 58,773 178,297 116,622
General & Administrative
Expenses 21,764 13,745 45,133 28,926
Total Expenses $ 104,702 $ 72,519 $ 223,429 $ 145,549
Income (Loss) before Income $ 4,645 $ 42,975 $ 14,496 $ 63,182
Gain of Sale of Joint Venture 53,638
Income before Income Taxes 4,645 42,975 68,134 63,182
Provision for Income Taxes 0 0 0 0
Net Income (Loss) $ 4,645 $ 42,975 $ 68,134 $ 63,182
Income (Loss) per common share $0.00 $0.04 $0.07 $0.06
Weighted average number of common
shares outstanding 976,580 976,580 976,580 976,580
</TABLE>
4
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HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Six Months Ended March 31
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ 68134 $ 63182
Adjustments to reconcile Net Income (Loss) to Net
Cash Provided (Used) for Operating Activities:
Depreciation Expense 1196 1188
Equity in (Earnings) Losses of Joint Ventures -10577 -4423
Accretion of Equity Interest in Assets of Joint Ventures
over Initial Investments -88 -1620
Distribution Received from Joint Ventures 501 950
Equity Contribution to Joint Ventures 0 0
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable -17988 -14759
(Increase) Decrease in Other Current Assets -90 6130
Purchase of Furniture & Equipment 0 404
Investment in Four Points Sheraton -100000
Investment in McKinney Hotel Project -1200
Increase (Decrease) in Accounts Payable and Accrued
Liabilities -36252 -33007
Increase (Decrease) in Amounts Due to Related
Parties 0 15077
Increase (Decrease) in Accrued Salaries &
Related Expenses 98 -8340
Net Cash provided (used) by Operating
Activities $ -96265 $ 24782
Cash Flows from Financing Activities:
Note Receivable -9869
Increase in Note Payable 0 0
Increase in Preferred Stock 0 0
Increase in Capital Stock 0 0
Net Increase (Decrease) in Cash $ -106134 $ 24782
Cash at Beginning of Period 140286 36843
Cash at End of Period 34152 61626
Net Increase (Decrease) in Cash $ -106134 $ 24783
</TABLE>
5
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HARRELL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF DISCLOSURE
The balance sheet as of March 31, 1997, and the related
statements of income and cash flows for the six month period
ended March 31, 1997 and 1996, are consolidated with the
company's wholly-owned subsidiary (Hotel Management Group,
Inc.), and it's wholly owned subsidiaries Hotel Management
Group (California), Hotel Management Group (Tennessee) and
Hotel Management Group (Mississippi), and are unaudited. In
the opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been included.
The financial statements and notes are presented as permitted
by Form 10-QSB, and do not contain certain information included
in the Registrant's annual financial statements and notes.
6
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(1) Hotel Management Group, Inc. (HMG)
Hotel Management Group formed a wholly owned subsidiary Hotel
Management Group (California), Inc. [HMG(CA)] to operate its
California properties, Hotel Management Group (Mississippi),
Inc. [HMG(MS)] to operate its Mississippi property, and Hotel
Management Group (Tennessee), Inc. [HMG (TN)] to operate its
Tennessee property. HMG (CA) began operations January 1,
1994. HMG(MS) began operations in July 1994 and ceased
operations in July 1996 due to the cancellation of the
Managment Contract because the property was to be domolished by
the State Highway Department. HMG (TN) began operations
October 17, 1996.
The following reflects a summary of the results of operations for the
three months ended March 31, 1997, and is fully consolidated with HMG(CA)
and HMG(TN).
6 months
Total Revenues 235,941
Total Expenses 70,923
Net Income 165,018
These results are fully consolidated with the Company on the enclosed
financial statements. Also they do not reflect any management fees charged
to HMG by Harrell International, which are charged on an annual basis.
(2) At the end of the quarter HMG managed three hotels and two apartment
complexes. A substantial amount of time and effort was given by the principals
of HMG to the location of additional management contracts.
7
<PAGE> 8
Part II. OTHER INFORMATION
Item 1. Legal.
There were no material legal proceedings, either on-going, instituted by or
against, or otherwise involving the Registrant during the quarter ended
March 31, 1996.
Item 2. Change in Securities.
The Registrant issued 243,331 $1.00 par value Preferred shares on
December 31, 1996.
Item 3. Defaults Upon Senior Securities.
The Registrant does not have any outstanding debt or securities of this
nature.
Item 4. Submission of Matters to a Vote of Security Holders.
No items were submitted to a vote of the security holders during this quarter.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) No report on Form 8-K was filed by the Registrant for the quarter
ended March 31, 1997.
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto fully authorized.
HARRELL INTERNATIONAL, INC.
Date: /S/ Paul L. Barham
---------------------- --------------------------------
Vice President, Chief Financial
Officer and Director
9
<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 34152
<SECURITIES> 0
<RECEIVABLES> 82694
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 119826
<PP&E> 25343
<DEPRECIATION> 20210
<TOTAL-ASSETS> 224962
<CURRENT-LIABILITIES> 38366
<BONDS> 0
0
243331
<COMMON> 9766
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 224962
<SALES> 0
<TOTAL-REVENUES> 237926
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 223429
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 68134
<INCOME-TAX> 0
<INCOME-CONTINUING> 68134
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68134
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
